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The further downside of nationalisation that I raised is that the government would probably not be able to sell national debt to the banks, so the deficit would probably be unfunded.
I think you have to allow for some maybes and probablies in your list - there are risks that are unclear, but which should influence decision making (the existence of the risk, however remote, is and should be enough to influence the policy chosen).
Surely, the ability of banks to buy government bonds has nothing to do with NAMA - it's to do with their capital ratios and how much the ECB will advance to them by repo against Irish government bonds. In which case they are really only acting as intermediaries between the government and the ECB as a lender and the government (through the NTMA) could use any bank in the EU to do this if Trichet has given his approval.Without it, the banks would have to be nationalised and their ability to buy government bonds would be greatly reduced if not disappear altogether.
You're right. But effectively the HFA lends to councils the money it raises, so a short-hand measurement for that amount is the amount of debt that the HFA has outstanding.I think you're wrong here yoganmahew. I'm almost certain that the debt of semi-state and state sponsored bodies are not included in the national debt. This is the case even when the debt is backed by a state guarantee. This why people only talked about the national debt "effectively" being doubled with the nationalisation of Anglo. The nationalisation of Anglo did not change our "real" national debt.
I'm not convinced by your FSA example; I don't think that the debts of the FSA are included in the national debt figure. What is included is debts of the local authorities (which are unquestionably part of the government) TO the FSA.
Yes, that is true, but with captive banks, the yield can be kept down. Can you see Deutsche bank buying Irish bonds at current market rates? Not without political pressure being brought to bear (as in, I'm a shareholder, bail me out of here...). There is also the point as to why they would want to when they have their own political pressures being brought to bear in their home states to do the same.Surely, the ability of banks to buy government bonds has nothing to do with NAMA - it's to do with their capital ratios and how much the ECB will advance to them by repo against Irish government bonds. In which case they are really only acting as intermediaries between the government and the ECB as a lender and the government (through the NTMA) could use any bank in the EU to do this if Trichet has given his approval.
No, there isn't. And I would expect to see their pension funds move to totally government debt basis, particularly now they are being taken into government management bit-by-bit. But this is spending with real money through the primary dealers. As the banks do. As your and my pension fund do.As far as I know, there is no legal impediment to the treasury/finance dept of the ESB, for example, or other semi-states/nationalised body investing in government bonds.
As I say, NAMA is a side-show. The real event is whether the government will go bust. NAMA reduces the likelihood of this by increasing the likelihood that the banks will survive.I'm yet to be convinced that this is relevant at all to whether NAMA is a good idea or not. Particularly given the two glaring non-sequiturs in the implied chain of reasoning: if NAMA is set up, the banks can remain private (arguable), if the banks remain private then they can help fund the government deficit (very arguable), thus NAMA is a good thing because it will allow the banks to buy government bonds.
I certainly can. If Trichet says he will offer repo for 10 billion worth of Irish government bonds then DB will take the hand off the government as the issued bonds represent risk-free profit; the Irish banks will do the same. If Trichet says he wont, then neither DB nor any Irish bank will buy the bonds unless they have funds available to do so at a cost less than the yield offered by the Irish government. In my mind, it has little to do with the nationality of the banks or NAMA or anything else.Can you see Deutsche bank buying Irish bonds at current market rates? Not without political pressure being brought to bear (as in, I'm a shareholder, bail me out of here...).
This seems so blo*dy obvious, what is he missing?A nationalisation provides a far sturdier umbrella than a revocable guarantee.
Finally, large funders prefer to fund, on a short or long-term, entities that are backed by sovereigns (who have recourse to taxation to repay) than lower-rated speculative plays such as poorly-capitalised banks.
I remember what you are talking about, but can't remember the case either! I suppose it will, in part, depend on whether Anglo is solvent, i.e. a business in its own right. If it is not, then its debts are likely to be on the national debt. No?As far as I know, the inclusion of publicly owned entities debts in the national debt figure has nothing to do with the sector; there is no special case for banks. It is determined by the degree of control the government/civil service has over the entity. Northern Rock's debt will be included in the national debt figure because it is now directly administered by a government department and has lost all autonomy and is considered a "public body". If it still operated independently but the government owned all the shares, it's debt would NOT be included; obviously sometimes it's not black and white - for example, I believe the government had to ask of the relevant EU authorities when it came to some PPP-type scheme for infrastructure last year (sorry I can't remember the exact details of the project).
The trouble is that NAMA is not being envisaged as such a body. It will be under the control of the NTMA and on funding see:NAMA presumably will be given enough autonomy and independence to ensure their debts are not included in the national debt figure. Note the government can offer to guarantee all NAMA's debts without the debts being included in the national debt. This is why I'd be shocked if the mechanism described earlier will be used (i.e. the government will write 50 billion worth of bonds to give to NAMA which will then use them to buy the bad loans from the banks who will use repo from the ECB to convert them into cash). What will happen is that NAMA will be given a state backed guarantee and will issue it's own bonds. Thus the cost of the banking policy failures will be kept out of the national debt figure.
I agree that the government is mostly concerned with 'how it looks'. And that Anglo has a big loss to be dealt with. But I think the tune is being called from Frankfurt and hiding the damage is going to be difficult.This is far more likely than the alternative; we know that this government is more concerned with appearances than the cold hard financial reality it is facing (when it finally decided to move on Anglo - it made far more noise about the need to repair the damage to the "reputation" of the Irish banking system and hardly mentioned the potential 10/20 billion loss).
Irish bonds can already be easily repo'd - no new permission is needed. Few are buying - 75% Irish banks, 10% central banks. A bit-to-cover of 1.24 on the last auction.If Trichet says he will offer repo for 10 billion worth of Irish government bonds then DB will take the hand off the government as the issued bonds represent risk-free profit; the Irish banks will do the same. If Trichet says he wont, then neither DB nor any Irish bank will buy the bonds unless they have funds available to do so at a cost less than the yield offered by the Irish government. In my mind, it has little to do with the nationality of the banks or NAMA or anything else.
Given that the government is Ireland and is effectively bust itself, no one wants to find out...Can you answer the very simple question - is it easier for a State majority owned quoted bank to get funding than a fully nationalised one?
Ok, yog, but I am seriously interested in the answer, does nationalisation reduce the ability to raise funds as Brian Lenihan argues?Given that the government is Ireland and is effectively bust itself, no one wants to find out...
but I don't know if that same rule applies to treasuries.be legally acquired in accordance with the laws of a Member State in a manner which the
Eurosystem considers to be a “true sale” of the securitised assets to the issuer and which is
enforceable against any third party and is beyond the reach of the originator and its creditors,
including in the event of the orginator’s insolvency;
As far as I understand the funding situation, NAMA will pay the banks for the assets that are sold to NAMA by selling/issuing them Govt. bonds. The banks therefore have to fund these new lower risk weighted but ECB eligible assets themselves. The banks are currently funding the high risk weighted (non performing loans) which are non ecb eligible assets themselves. For the banks the funding position is broadly similar except their assets are now liquid and ECB eligible. Govt borrowing figure would increase by the amount issued to the banks but importantly as the increase in the Govt funding requirement is met by the banks participating in NAMA the amount required to be raised from international investors would be broadly unchanged. Open to correction on the above.
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